Proposed global banking rules could hurt Canada
TD Bank chief executive Ed Clark says some of the rules being proposed by global banking regulators could affect Canada’s banking system negatively.
Clark told investors at the company’s annual meeting in Quebec City that certain rules would require banks to put up the same amount of capital for both high-risk and low-risk assets.
Clark says that such a regulatory requirement would likely push Canadian banks to invest in more high-risk assets than they have because of the bigger potential returns compared with lower-risk holdings, such as mortgages.
Clark suggests that would make the banking system less stable, and ultimately create an outcome that would be “the exact opposite of what reforms are meant to achieve,” which is to avoid another catastrophic financial downturn.
Canadian banks have been widely praised for their relatively cautious approach to risk, which helped them and the country as a whole weather the recent global crisis that was sparked in late 2008 by a collapse of the U.S. financial sector.
